Debt Consolidation
Reduce your monthly payments with a debt consolidation.
There are times when it is prudent to increase the mortgage on your home to pay off other debts with a higher interest rate. For example, your credit cards and car loans may have a higher interest rate than your mortgage. Increasing your mortgage at a lower rate than your other debts decreases your interest costs and lowers your monthly payments, improving your monthly cash flow. If you have sufficient equity in your home and a high amount of consumer debt, a mortgage debt consolidation may be worthwhile considering.
EXAMPLE: If your home value is $300,000 and your current mortgage balance is $185,000 then your home equity is $115,000
You could tap into your home equity and pay off some or all of your credit cards and loans to make your life easier.
Now, let’s say you also owe $10,000 on a line of credit, $25,000 on a bank loan and $50,000 on 7 credit cards.
In total you are spending $3,488.99 while you could be paying only $1,681.02 and reduce your monthly obligations by 51.82%.
BEFORE
|
|
|
|
AFTER
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|
|
Creditor
|
Balance
|
Payment
|
|
Creditor
|
Balance
|
Payment
|
Mortgage
|
$185,000
|
$1,183.64
|
|
Mortgage
|
$275,400
|
$1,681.02
|
Credit Line
|
$10,000
|
$300.00
|
|
Credit Line
|
$ 0
|
$ 0
|
Bank Loan
|
$25,000
|
$505.35
|
|
Bank Loan
|
$ 0
|
$ 0
|
Credit Cards
|
$50,000
|
$1,500
|
|
Credit Cards
|
$ 0
|
$ 0
|
Total Owing
|
$270,000
|
$3,488.99
|
|
Total Owing
|
$275,400
|
$1,681.02
|
|
|
|
|
Your Savings
|
|
$1,807.97
|
This example is for illustration purposes only and it was based on the following assumptions: Before mortgage rate of 6% calculated semi-annually based on 25 year amortization; Bank loan 8% rate and payments spread over 5 year term; Line of credit and credit card payments equal to 3% of outstanding balances. After mortgage rate of 5.5% calculated semi-annually amortized over 25 years, insured at 2% with one time insurance premium. Annual Percentage Rate (APR) is 5.576%